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What is helping the Lake Resources (LKE) share price bounce back?

Posted: 24 June 2022 1:39 pm
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Despite the slide in the last few days, the lithium explorer's shares are up 86% over the last 12 months.

Lake Resources (ASX: LKE) is among the best performing shares on the ASX on Friday, finally reversing course after a slide over the last few days that saw the lithium explorer lose nearly 50% of its value.

At the time of writing, the stock was up nearly 18% to 82.5 cents.

Why is the LKE stock price rebounding?

Part of the steep gains in the Lake Resources stock price on Friday can be attributed to a revival in sentiment for lithium stocks after top brokers reaffirmed their faith in the sector amid the steep decline in valuations over the past few weeks.

Analysts at Macquarie upgraded their forecast for lithium prices on the expectation that new supply from emerging spodumene producers won't materialise in significant volumes by 2023 despite demand for the commodity continuing to rise rapidly from the electric vehicle (EV) market.

Macquarie now expects spodumene prices to peak at US$4,900 a tonne in the September quarter, and has duly lifted its short and medium-term price forecasts by 8% to 13% as demand potentially offsets any increase in lithium supply.

That is good news for ASX-listed lithium stocks like Lake Resources.

In fact, even rival explorers Core Lithium (ASX: CXO) and Pilbara Minerals (ASX: PLS), which have also suffered in recent weeks, were up 4% and 5% respectively on Friday.

Analysts at Bell Potter have a similarly encouraging outlook on the sector and earlier this week put a "Buy" rating on 4 lithium stocks including Lake Resources.

Reassurance

Importantly, the rebound in Lake's shares also comes after the company sought to reassure investors late on Thursday that it was operating "business as usual" despite the sudden departure of Managing Director Steve Promnitz.

The market was spooked earlier in the week after Lake Resources made the shock announcement about the immediate exit of Promnitz, who had led the company since 2016 and had been instrumental in its transformation to a supplier to the global EV supply chain.

Sentiment worsened after it emerged that Promnitz had sold off his entire stake of 10.2 million shares in the company.

The move came just months after the junior lithium explorer signed a major new offtake agreement with global car giant Ford Motor Company (NYSE: F) in April to supply about 25,000 tonnes a year of lithium from its flagship Kachi Project in Argentina. It had signed a similar agreement with Japan's Hanwa Co Ltd in March.

But Lake clarified on Thursday that Promnitz had left of his own volition and had not provided any reasons for his sudden departure. It further said there was no change in its plans to develop the Kachi and 3 other lithium projects in Argentina.

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